As part of its ongoing effort to expand service sector coverage in the Producer
Price Index (PPI), the Bureau of Labor Statistics (BLS) introduced new price indexes for
Management Consulting ServicesNorth American Industry Classification System (NAICS)
541610in January 2007. Data for this index, which date back to June 2006, appear in
table 5 of the PPI Detailed Report and are
available online through the BLS website.

While virtually all other PPI industry indexes are published at the 6-digit NAICS
code level, the PPI for Management Consulting Services corresponds to the 5-digit NAICS
code 54161. In order to be consistent with PPI systems, code 54161 has been re-coded in
BLS publications and databases with the PPI-constructed code 541610. The five 6-digit
NAICS industries that comprise 54161 are included as product line detail under code 54160.
These lines include:

Administrative Management and General Management Consulting Services

The provision of operating advice and assistance to businesses and other organizations
on administrative management issues, such as financial planning and budgeting, equity and
asset management, records management, office planning, strategic and organizational
planning, site selection, new business startup, and business process improvement.

Human Resources and Executive Search Consulting Services

The provision of advice and assistance to businesses and other organizations in one or
more of the following areas: (1) human resource and personnel policies, practices, and
procedures; (2) employee benefits planning, communication and administration; (3)
compensation systems planning; (4) wage and salary administration; and (5) executive
search and recruitment.

Marketing Consulting Services

The provision of operating advice and assistance to businesses and other organizations
on marketing issues, such as developing marketing objectives and policies, sales
forecasting, new product development and pricing, licensing and franchise planning, and
marketing planning and strategy.

The provision of all management consulting services not mentioned in the other
categories. Telecommunications and utilities management consulting services are included
in this service area.

Most consulting transactions are measured and tracked in the PPI with model prices.
For each responding firm, a group of specific contracts are selected during the initiation
period. These contracts specify the detailed services provided and establish benchmarks
for weighting the rates of the different types of consultants that work on the projects.
Respondents provide the rates for each of the professionals who bill for their time on
each of these projects. A total charge is calculated by multiplying the hours that
consultants work on the selected project by their rates.

Whenever possible, this total price is then adjusted by the firms realization rate
for the specific project. The realization rate is calculated by comparing the total
amount of revenue actually received for the project to the amount that would have been
received for the project if all consultants had billed for all of their time at
non-discounted rates. This is done because firms frequently provide discounts of varying
amounts to different clients. The respondent estimates the realization rate they would
earn if they were to work on the same contract that was selected in the initiation period
during the current month.

In subsequent months, for each specific service selected, the respondent updates the
hourly rate for each professional, the realization rate, and the estimated cost of all
billed travel and business expenses. Since the services provided in the model are held
constant over time, the number of hours worked by each professional will remain unchanged,
unless the number of hours required to provide the service changes. If the number of
hours required to provide the service changes, the number of hours in the model will be
updated and the resulting change is shown as a price change.

In some instances, a contingency or success fee may be charged in addition to the
project hourly rates. Contracts that include these fees call for a payment to be made if
a project is determined to have achieved a pre-established benchmark (for example,
achieving a certain level of cost savings). In these cases, respondents are asked to
approximate the dollar value of the contingency fees that they would earn if they were to
achieve the stated benchmark on the given contract during each pricing period.

The exception to this model of pricing for management consulting services is in the
executive search segment of Human Resources and Executive Search Consulting Services.
Virtually all executive search consulting transactions are priced as a percentage of the
total first year compensation of the placed executive. This percentage fee is frequently
called a retainer. The collected price for these transactions is established based on
actual contracts selected during the initiation period. In subsequent months, respondents
are asked to estimate the value of the total compensation that the placed executives would
earn if they were to be hired for similar roles by similar companies during the current
month, and the percentage fee that the firm would charge for conducting the service. The
price is calculated by multiplying these two figures together.